DeepSeek won’t sink US AI titans
Subscribe to enjoy similar stories. Nvidia’s market value surged because of explosive demand for AI chips and services, but the company’s shares fell sharply in a chip-sector selloff on Monday. Necessity might be the mother of all invention, but sparking the mother of all selloffs seemed like a stretch.
That wasn’t the case Monday morning, though, as U.S. markets opened to fresh fears about DeepSeek. The Chinese artificial-intelligence startup announced a significant breakthrough late last week with AI models that perform nearly on par with advanced U.S.-born technology.
The rub is that DeepSeek claims to have trained one of its latest models for $5.6 million in computing costs—a fraction of what is currently spent on this side of the Pacific on the same activity. OpenAI’s GPT-4 model that was launched in late 2023 have seen their market values surge because of explosive demand for AI chips and services. The high entry price of AI—and sanctions from the U.S.
government limiting the sale of advanced AI chips to Chinese companies—also serve as a competitive moat for tech titans such as Microsoft, Amazon, Google and Meta Platforms. They are among the few companies with enough capital to build out expensive AI networks on a large scale. Hence, DeepSeek’s breakthrough sounds like particularly bad news for nearly every company carrying a market capitalization of more than $1 trillion.
Nvidia and Broadcom shares crashed more than 14% by Monday afternoon, leading a chip-sector selloff that clipped more than 8% from the PHLX Semiconductor Index. Microsoft and Google parent Alphabet—the companies seen at the forefront of offering AI-based cloud-computing services—suffered 3% hits during morning trading. The tech-heavy Nasdaq slid
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